“Preferences for Privacy in Internet Lending” by Miss Chu Dang (Ivy)
Miss Chu Dang (Ivy)
Ph.D. Candidate in Marketing
CUHK Business School
The Chinese University of Hong Kong
Consumers’ valuation for privacy plays a crucial role in determining how much data a firm can collect to drive its managerial decisions. Meanwhile, previous literature that measures consumers’ dollar value for privacy often features small incentives to encourage data sharing. In this paper, we estimate consumers’ valuation for privacy by examining their data sharing decisions under a wide range of incentives, for customers of a microloan provider in Hong Kong. During the application process, the loan provider uses interest rate discounts to incentivize applicants to provide additional personal data. This percentage discount translates to dollar gains from 4,643 to 9,285 Hong Kong dollars (amount to 30 to 50 percent of their monthly salaries) for applicants who request different loan terms and expect different repayment behaviors. Using a structural model, we calculate the dollar price for personal data as a function of applicant risk type and the characteristics of the loan that they apply for. Despite the substantial benefits of sharing data, only 19 percent of applicants choose to share any optional personal data requested. In the counterfactual, we show how the incentive scheme can balance its role in collecting personal data to improve loan offering decisions and its role in screening applicants who accept the loan.